Can we compete?

[gombault]

Hi All,

The time when cheap Chinese imports only affected the textile industry is gone.
Our entire manufacturing industry is at risk of collapsing. I’ve been making LED lights for mining application for the last 8 years. A local company sent my lights to China as samples and is now selling a Chinese version of my lamps at half the price. I also started making auto lamps for cars and trucks but this market is very difficult to compete with the cheap Chinese imports. We are now getting to the point that anyone can take a locally made product send it to China and have the product made at half the price. We need government to put an extra tax on imported products that has a locally made equivalent. For one of my lamp that’s in a very competitive market I tried to get the PC board made locally the best price I could get was R28.00 I sent the file to China and they charged me R10.00 per board that’s with shipping. So can we compete with China?
Yes I think we can on many products if we could get an extra import tax on the Chinese products and change our production method. Lets take my industry. The led’s and all the other electronic components must still come from China so the playing field is not equal. What needed is that the rest of the lamp like the plastic housings and the assembly are done locally. That’s another problem because here we have trade unions demanding higher wages as well as other labor costs. Lets take the cell phone chargers that everyone is selling. If you open one you will see the electronics is not machine made its all been hand assembled and soldered it was designed for manual assembly.
So could we make the call phone charger locally? Yes but not in a factory with labor laws and unproductive workers.
I am going to design one of my lights for manual assembly I will not use PC boards for the components or use any of my workers to assemble these lights. I will be using mostly woman working from home assembling the lights and pay them per unit done I will limit each person to only 10 lamps per day and pay them R10.00 per unit assembled. We have so many unemployed people and I already have to many that want to assemble these lights.
TEXTT

[Justloadit]

Then our government wonders why there is so much unemployment.

[Raymond Smit]

Yes we can compete ... but not on price. Luckily price isn't the only reason we buy. Do you drive the cheapest car, eat the cheapest food, wear the cheapest clothes?
Probably not. So how do you compete with the same product in the same market? Well not in product and not on price.

You need to differentiate yourself from the competition in another way (not with widgets). Let me give you a couple of examples of how big companies are doing it:

Head & Shoulders – You get rid of dandruff
Olay – You get younger looking skin
Domino’s Pizza – Fresh hot pizza, delivered to your door in 30 minutes or less or it’s free
Fedex – When it absolutely, positively has to be there overnight
M&M’s – Melts in your mouth, not in your hand
Wonder Bread – Wonder bread helps build strong bodies 12 ways
Nyquil – The nighttime, coughing, achy, sniffling, stuffy head, fever, so you can rest medicine.
BMW – The ultimate driving machine
Avis – We are number two, we try harder
Coca Cola – The real thing

Being first, having a unique attribute, unique claims, reliability, guarantees etc are all ways you can differentiate yourself without
cutting price. In other words having extra value to justify your higher price is essential for your business.

[adrianh]

You can simply forget about competing in the LED light manufacturing industry in this country. I've seen many companies pack it in, we are simply too small to compete with the big boys. Think about it, I imported a laser cutter directly from China and had it in my hands for R70K. The local distributor wanted R169K for the same machine. Who am I going to support...

If you are goingto use a bunch of ladies to assemble PC boards rather than pick n place machines then you're heading for disaster. You have no control over quality and many people steal, break things and their soldering sucks...

The bottom line is that the man in the street is the one that ends up paying R 100 for a locally produced device that costs R30 elsewhere because we try to protect certain industries. Why do we hate towtruck companies (besides the fact that they drive the way they do) because they charge the rediculous rates that they do claiming that they need to be protected. Why are our public transport systems a disaster, because taxi organizations want to be protected.

I am anti protection, find a niche and make your money, don't compete in an industry where the big boys play and then complain. China is what it is and we need to stay ahead of the game, it doesn't help to complain about the way thet they operate, it is what it is. Change direction, do something else, find niche markets...

@Raymond, the guy who goes to buy a tail lights for his fleet of trucks every 2 months couldn't care less about any of that fluffy stuff, he wants it to work and he wants it cheap. Many companies trade price for quality, especially in the LED light industry. The problem is that an led light can be 60% broken but can still be considered to be "working". Imagine you have a company that installs led downlighters, 100's of them, you wouldn't care less about slogans and stuff as long as the stuff works and is cheap.

[Raymond Smit]

@adrian - on behalf of all the marketing guys out there, I apologize for letting you believe a slogan equals true competitive advantage. Slogan = something stupid that rimes.
Unique selling proposition/Competitive advantage = something that matters to the customer, which will allow you to win more business.

Lets say for example your advantage is guaranteed longevity. You can say: Dear mr. prospect, our LED lights lasts on average 3times as long as cheap importers - here is what
the investment looks like on paper (now you compare the cost for your prospect - competitor A and B column). See how true advantage allows you to sell more? Your advantage
must be something tangible and benefit orientated to the customer ... not some silly slogan.

[murdock]

i had to laugh...they say led last for x amount of hours...just not in SA...they say our power supply is too unstable...or is it the kak quality led lamps being supplied...sorry but i am with adrian on this one...a hooker sits on the corner of a street everyone complains...but the husbands and men in the comunity are make use of her services...dont make a law preventing the hooker from sitting there..stop the people using her services...just like drugs...the drugs are not the problem...its the people using them...someone must be buying cheap chinese chunk for them to be dumping it here...making laws are not going to stop it.

watch carefully when containers arrive in certain industrial areas...how they block off the access and how many of them are unloaded late at night...and by who...makes you think.

what is more difficult to dump plastic or metal...watch the huge loads of metal and other minerals...leaving the ports in africa and watch how much plastic is dumped back by the container load...also makes you think.

[adrianh]

@Raymond - When I go to Midas to buy a tail light for my car I don't read any of that or compare any of that, I have a light in the one hand and a light in the other. All I have my subjective view of quality vs price...All the marketing fluff is great when you are selling Coca Cola via Facebook but at the rockface, where you are standing cash in hand trying to solve a problem i.e. buy a globe, brake pads or whatever, none of that matters. (You might say that the marketer influences that decision, maybe, but I honestly don't know the difference between one pirate brand and another).

Take tires, there are so many different brands now that it is anybodies guess which are good and which are not. Yes, you could stick to the wellknown brands and pay a premium, but who is to say that the half price Korean brand is any worse. Again, look at cars, you could buy a NISSAN or a KIA, whch is better (if it were up to the marketers it would be the one who hires the best marketer) Now, lets take this argument further, the marketer writes a splurb that causes murdock to spend lots of cash on a product that turns out to be crap, what now?

Remember something, the leds are also manufactured in China. So, the leds are imported ino SA and the lights are assembled here using the same leds. (But because its assembled locally it costs 3 times the price)

At the end of the day, when all is said and done, the guy left holding the can is the one who installed the part and has to justify the price vs the longevity thereof. That person couldn't care less about marketing or competitive advantage or any other fluffy stuff, all he wants is the cheapest product that lasts the longest. (Lasts the longset is also a very difficult term to define in the lifespan of LED lights. Define lifespan - when they produce 80% power, 70%, 50% )

[dfsa]

@Gombault. Sorry to hear that. I know what you are going through. Unfortunately that is the way it is going. China has got open trade agreements with the government. And the sad fact is government don't give a damn about unemployment.

My advice to you would be to search the best products in your industry, then contact the chinese factory's who offer the best quality products. They are quite open to make deals with. You then negotiate sole import agency with them. At least this way you will make a good living. If other chinese company's enter the market with cheaper products, just speak to your suppliers. They actually do Honor each others market share to some extend.

[Blurock]

A local company sent my lights to China as samples and is now selling a Chinese version of my lamps at half the price.

This sounds almost like industrial sabotage. Unscrupulous and unethical. Have you registered your design? (differs from patent) Is it possible to take legal action against the copycat?

We need government to put an extra tax on imported products that has a locally made equivalent.

It is possible to canvas support in your industry for additional import tax on products. You can then make a joint presentation to the DTI. However, there has to be a clear case of possible dumping and anti-competitive measures. Also how it affects your industry with reference to job creation.

It is not possible for local manufacturers to hide their inefficiencies by imposing trade barriers and higher import taxes and custom duties. Manufacturers have to ensure that they are using the latest and best production techniques and equipment in order to be competitive.

Your philanthropic job creation efforts are commendable and will make a great difference in those communities where it is employed.

[dfsa]

This sounds almost like industrial sabotage. Unscrupulous and unethical. Have you registered your design? (differs from patent) Is it possible to take legal action against the copycat?

It is possible to canvas support in your industry for additional import tax on products. You can then make a joint presentation to the DTI. However, there has to be a clear case of possible dumping and anti-competitive measures. Also how it affects your industry with reference to job creation.

It is not possible for local manufacturers to hide their inefficiencies by imposing trade barriers and higher import taxes and custom duties. Manufacturers have to ensure that they are using the latest and best production techniques and equipment in order to be competitive.

Your philanthropic job creation efforts are commendable and will make a great difference in those communities where it is employed.

You have some great advise and pointers there Blurock. Sadly, the problem Gombault will be running into, will not be worth his effort. The chinese are here and they are here to stay. It costed them some money "SMALL CHANGE" to get full open trade agreements with individual people in power ( Not agreed with the citizens.) They did not stop there though. They own now most if not all our copper mines. They have been buying selected companies left right and center.

Just recently they also bought the Dimention Data group.

Sasol lost their local advantage to have by law at least one pump at every petrol station. Their only way to survive on this was to make deals with the global companies to buy their fuel. I am not 100% correct, but Sasol still manufacture around 50-60% of our local fuel usage to the likes of BP, SHELL,and all the rest of them.

The only real protected local manufacturers, are the Motor Industry. Sad fact on that is that our locally produced models that get exported are sold for cheaper than here. This include delivery and taxation on the other side.

The rest of Africa pay around 30k for a similar car that you and me pay 140k for. Yet all those cars land in Durban and get sold to our closest nabours, yet we are not allowed to buy it, well unless we want to pay like 300 odd % import duty.

RAV4 they pay around $US8K, well do the calc and see what you pay for a RAV4

Ever been in Nelspruit?, Go see how many MOZAMBIQUE registered cars are driving around there and owned by South Africans.

[AndyD]

I’ve been making LED lights for mining application for the last 8 years. A local company sent my lights to China as samples and is now selling a Chinese version of my lamps at half the price.

You started out well but you didn't evolve and it sounds like you're paying the price.

You started by purchasing LEDs from China and you added value to them by making an LED lamp for the mining industry. At this time this was a niche market and you could sell good numbers of them at a handsome profit. On the back of this success you could have developed a range of products over time for other local niche markets but it sounds like all your eggs were in the one basket and your market is no longer a niche one.

I wouldn't make the mistake of competing with existing products that are already available from the far East, I would focus my efforts on developing a new product for a market that isn't being well catered for.

[Blurock]

The chinese are here and they are here to stay. It costed them some money "SMALL CHANGE" to get full open trade agreements with individual people in power ( Not agreed with the citizens.)

Agreed. For instance, water meters have to have SABS certification. China has dumped thousands of water meters in South Africa. These water meters, which are not SABS certified, was given to local municipalities for free. They are of a poor quality and need to be repaired before they can even be installed locally. I wonder what was given to China in return?

[dfsa]

I wonder what was given to China in return?

More free resources. More stolen scrap copper. Tax free haven ( I know off a good few chinese businesses that are not registered) More access to raw material at a fraction of local cost.

You fill my back pocket buddy and I will open the gates.

[adrianh]

China isn't all bad and other countries are not all good either. Most of our products are manufactured in China whether we like it or not.

To get back to the original debate: Should our government protect an industry that clearly cannot be competitive in the national and international market? LED's are made in China, assembled into complete lights and then shipped here at a price, lets say P. The same Chinese LED's are shipped here, assembled into lights here and then sold at 3xP. We say that the high price is due to the cost of labour, but at the end of the day, the man in the street has to foot the bill, and as we all know, none of us want to pay a premium for the exact same product.

[gombault]

Hi All,
It’s easy for those that only imports products to speak, as they manufacture nothing. The EU placed restrictions on imports from non-union countries to protect their manufacturing industries we must do the same. I gave you my situation with led lights but this problem is not just limited to my industry it affects all manufacturing in this country.
Regarding the designing for manual assembly.
Those locally with automated pick and place machines are already feeling the crunch from China as the components and PC boards are all from there already why not place it there as well.
To Adrianh,
The Chinese are doing manual assembly with the cell phone chargers and it’s not a disaster. If you design the product right you can even have a better product than those done on pick and place machines.

This quality thing is also a problem, the marketing guys would tell you otherwise but I know it mostly come down to price.

Let me give you an example: I believe my truck lights are the best.
Plus point on my truck lights.
My light has 36 led’s for stop and tail light, most Chinese lamps now only have 8 they are driving those led’s to the max to get the required light output. I am driving my leds far below its maximum rating to increase reliability. My light is also the only lamp that you can open to replace a failed led or broken lens, all other led lamps are sealed units. When you buy a new car what is your life expectancy of its rear lights? Everyone will say the life of the car. Then why don’t the truck owners expect the same life out of their trailers lights? This is the selling point I am trying to make to give the customer a lamp with the same life expectancy of the light on his car but in reality it doesn’t work like that the only thing the customer want to know is WHATS YOUR PRICE.

You can’t get patent rights on led lights because it’s not unique. I do however have a patent pending on a new light system for trailers. It’s a new two wire light system I want to concentrate mainly on fuel tankers with this system. I already spent a fortune on making all the components to comply with the specifications required for SANS 1518

More on this system and all the other lights I make at www.celgo.co.za .
AndyD I don’t think there is a market that hasn’t been well catered for and if there is just send the samples to China to change that.